Tax Commissioner Chris Jordan addressed the ATAX 11th International Tax Administration Conference in Sydney on Monday. At the tail-end of his address, he touched on International “secrecy haven” issues.
He says the data revolution “…is one reason why secrecy havens are failing”. Referring to Australia’s “…network of over 100 treaties and agreements”, he said that access to account data from domestic and international banks had enabled the ATO to initiate over 3,000 enquiries over the past six months.
Already completed enquiries and investigations into undeclared offshore income and assets meant that “…the Australian Federal Police and Australian Crimes Commission have charged 73 people with serious offences, and the Project Wickenby taskforce has raised liabilities of $1.9 billion and restrained or frozen around $200 million in assets.” Information from the (so far) more than 3,000 enquiries made of banks and other financial institutions is likely to increase the number of taxpayers subject to full Wickenby style audit.
Commissioner Jordan also made reference to the likely impact of the “..new G20-endorsed global standard for automatic information exchange”, which he says “…means that it is harder to hide.”
1 comment on “Australian Tax Commissioner’s Update On International Information Exchange”
You have to wonder if tax havens are falling out of favor even with all the tax treaty signings. The legal use of tax havens by the big Wall Street firms has and will not ebb. Wall Street and private equity are in tax havens to avoid US capital gains taxes and management fee taxes. Offshore passive foreign investment companies (called PFICs and QEFs by IRS) don’t have to file income tax returns. See the attraction?
Bain Capital ($70 B AUM) have 138 PFIC funds in the Cayman Islands to avoid Capital Gains taxes. As long as the IRS continues to offer nearly a Trillion $s in (dividend) deductions to offshore companies domiciled mainly in tax havens, it’s not about to change much IMO.
The IRS offered over $800 Billion in deductions to US companies that had CFCs in Cayman, Bermuda and Switzerland, but few of them bit. They would let these offshore companies repatriate their profits with a tax rate of just 5.25% overall.
Some 843 corporations, a relatively small number of corporations given that roughly 9,700 corporations had CFCs in 2004, took advantage of the deduction. But these corporations repatriated almost $362 billion. OF that, $312 billion qualified for the deduction, creating a total deduction of $265 billion.
The newly added Internal Revenue Code section 965 outlines the provisions for this deduction. The IRS wrote: “Firms can be expected to park considerable shares of their earnings and profits in the Netherlands, Switzerland, Bermuda, Ireland, Luxembourg, and the Cayman Islands, as these countries are known for their favorable tax policies”
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